Over the next few weeks, we'll have April economic numbers and lots of chatter about the debt ceiling as our next catalysts. Last Friday's action injected hope into the bulls while cooling off precious metals and bonds. However, until the debt ceiling issue is addressed, maintaining exposure to a precious metal such as gold feels like the correct strategy. On the equity side, the Nasdaq 100 remains the strongest breakout candidate.
Apple (AAPL) concluded the apex of earnings season following yet another quarter-point rate increase by the Federal Open Market Committee (FOMC). This past Saturday, Berkshire Hathaway's (BRK.A) (BRK.B) annual meeting finished off a trifecta week of catalysts for buyers and sellers.
Interestingly, when you look at Warren Buffett's top holdings, you can assemble a reasonably diverse large-cap portfolio just by picking up a handful of names. Instead of just taking the top five holdings, though, I'd curate a bit.
For example, if you wanted to avoid doubling up on a sector, such as financials, where Bank of America (BAC) and American Express (AXP) are both top Berkshire holdings, then just pick one. I'd lean toward AXP given the relative strength and a little less impact from rising rates on its lending.
Of course, Apple would find its way in as it remains Buffett's top holding, and the Oracle of Omaha sounded more bullish on it than any other name mentioned over the weekend.
Coca-Cola (KO) remains a mainstay for Berkshire Hathaway, and the performance has been impressive. If that stock gets above $65, it could make a quick move into the low $70s. The term "quick" for Coke is relative as this isn't a tech name, so that move could take four to six weeks to play out.
Finally, I'd add Occidental Petroleum (OXY) into the mix. Although Buffett stated that he would not buy the entire company, he still holds a 20% stake and didn't rule out adding more shares. Having a significant shareholder with the level of patience demonstrated by Berkshire Hathaway is a dream scenario. Admittedly, the technical setup isn't the best, though energy does add a nice mix of diversity to these four names.
These are only four stocks, though, so while they are diverse by sector, they are not all-encompassing or diversified among market capitalization. However, as a starting point, it's pretty solid. From here, I would work to add precious metal exposure and then expand the size of other companies to the portfolio to include small-cap and midcap names.
If you decide to go down this path, remember your timeframe should be much longer than that of a trader. When you mirror someone's investment selections, you'll also want to reproduce their timeframe.
I plan to see how the market reacts to the weekend contemplation of the Fed's decision last week before making any moves, but my eyes remain on tech and gold for now.